How many times have you walked up to someone, introduced yourself, and held out your right hand to receive or offer a handshake? We all do it without thinking about the original significance of the handshake, but it is more than a greeting.
The handshake has its early history in business transactions where contracting parties shook hands to seal a deal. The Uniform Commercial Code (UCC) has much to say about the efficacy of handshakes as related to contract validity. The UCC is a set of statutes adopted in some form by 50 states, and it governs business transactions among merchants and consumers. In Georgia, for example, you can still form a General Partnership on a handshake.
This article and the next in the series will look at best-practices for contracts and negotiations to help the contract writer or negotiator produce the most comprehensive and favorable results. We will not attempt to define what a contract is nor present step-by-step negotiating techniques, as both of these will vary widely by the nature of the contract subject matter and the parties involved.
From a simple handshake to a multimillion-dollar, long-term, multinational, highly conditioned transaction, the procedures for putting an enforceable agreement into place and the communication between or among parties share very common practices. The basic practices are independent of the value and explicit content and terms in the agreement. The skillful work of a contract writer and a negotiator can save or earn the company significant value in terms of dollars, reduced liability, enhanced reliability, and indemnity against non-performance.
Approaching this subject from either side, the person or company that makes the offer (or contract) and the person or company that receives the offer or contract, what follows are the practices that should be observed when entering into face-to-face negotiations.
You should arrange a meeting with all the department representatives who will be affected by the terms or content of this contract. If your company originated the contract or if the visiting company sent you a copy of its contract, then you want to be sure that everyone attending the actual negotiation meeting has received and read the contract in its entirety. Now is the time to get everyone's feedback on what they have read.
Any materials you intend to display or distribute during the negotiations should also be reviewed by the pre-meeting group. Check everyone's calendar for availability and have designated backups in case of unanticipated absences.
In the meeting, you will want to discuss things like bottom lines for pricing, delivery schedules, penalty clauses, warranties, grace periods for performance, first article approvals, IP, items upon which you cannot compromise, who needs to be in the active negotiations and what each person's key role is, any creative or unique negotiating strategies you may want to try, and what your competition can do as a potential response to your bottom line terms.
In this meeting, you will want to give an overview of the other company's products and individuals, including the company's standing in the marketplace, so that everyone in the active negotiation will be fully informed going in.
At the end of this company review, everyone will have a better understanding as to the strength of your company's negotiating position. For example, if you are working with a company that provides a product you desperately need, and no other company makes that product, then your negotiating position might not be as strong as you would like it to be. And, if their company “doesn't need your business,” then your position becomes even weaker. You don't want some hotshot member of your negotiating team blurting out something like, “We can just take our business elsewhere.”
A company knows if it's the only one offering a product, so you shouldn't make any allusions to having an alternative solution — unless you have a backup re-engineering plan ready to go! They will have investigated their own marketplace and have come to the table knowing they are unique. They will know your only alternative is to go back to the design table and that it will cost you more time and effort than giving up a price point or two on the contract.
In the second and concluding part of this article, I will review what happens at the actual contract negotiation and how you can achieve your corporate goals without breaking the bank.